Correlation Between Transocean and China Hongqiao

Can any of the company-specific risk be diversified away by investing in both Transocean and China Hongqiao at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Transocean and China Hongqiao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transocean and China Hongqiao Group, you can compare the effects of market volatilities on Transocean and China Hongqiao and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Transocean with a short position of China Hongqiao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transocean and China Hongqiao.

Diversification Opportunities for Transocean and China Hongqiao

-0.42

Correlation Coefficient

Transocean  China Hongqiao

Very good diversification

The 3 months correlation between Transocean and China is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and China Hongqiao Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Hongqiao Group and Transocean is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Transocean are associated (or correlated) with China Hongqiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Hongqiao Group has no effect on the direction of Transocean i.e., Transocean and China Hongqiao go up and down completely randomly.

Pair Corralation between Transocean and China Hongqiao

If you would invest  1,326  in China Hongqiao Group on September 22, 2024 and sell it today you would earn a total of  0.00  from holding China Hongqiao Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Transocean  vs.  China Hongqiao Group

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Hongqiao Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Hongqiao Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, China Hongqiao is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Transocean and China Hongqiao

The main advantage of trading using opposite Transocean and China Hongqiao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transocean position performs unexpectedly, China Hongqiao can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Hongqiao will offset losses from the drop in China Hongqiao's long position.

The idea behind Transocean and China Hongqiao Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.